iShares Launches Longer-Term Bond ETFs

December 09, 2009

 

iShares launched Wednesday two government- and credit market-linked bond exchange-traded funds that will provide exposure to longer-term bonds.

They are:

  • iShares 10+ Year Credit Bond Fund (NYSEArca: CLY)
  • iShares 10+ Year Government/Credit Bond Fund (NYSEArca: GLJ)

The new funds will complement iShares’ existing lineup of fixed-income ETFs by adding offerings on the long side of the yield curve in those bond markets. All together, iShares' roster of fixed-income ETFs now totals 26 funds.

CLY will track the BofA Merrill Lynch 10+ Year U.S. Corporate & Yankees Index, which invests both in U.S. corporate bonds and so-called Yankee bonds, which are dollar-denominated bonds issued by foreign companies and governments.

Yankee bonds do not convey the currency diversification benefit of other foreign bonds, and are linked to domestic as opposed to foreign interest rates. Some investors favor Yankee bonds because they are regulated by the SEC; they often offer a risk premium over U.S. securities; and they are rated by U.S. ratings agencies such as Moody's and Standard & Poor's, whereas most internationally listed bonds are not.

Bonds included in the underlying index have $250 million or more of outstanding face value and have at least 10 years to maturity or first-call date.

As of June 30, CLY’s benchmark comprised nearly 1,100 dollar-denominated issues from companies with businesses in some 33 countries.

GLJ will track the BofA Merrill Lynch 10+ Year U.S. Corporate & Government Index, which is a broad, market-value-weighted index designed to measure the performance of the long-term, investment-grade U.S. corporate and government bond markets.

The index is a market-value-weighted, total rate of return index comprising issues with at least $250 million of outstanding face value—$1 billion in the case of U.S. Treasuries—and have at least 10 years to maturity or first call.

As of June 30, the index comprised 1,266 issues of companies operating in 33 different countries.

GLJ will face Vanguard's Long-Term Bond ETF (NYSEArca: BLV), although BLV invests in issues with an average maturity of 22 years, and only some 35 percent of its portfolio of more than 850 issues is dedicated to 10- to 20-year maturity bonds.

Both CLY's and GLJ’s annual operating expenses are pegged at 0.20 percent.

 

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